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Natural Gas Price Prediction – Prices Consolidate as the Weather Remains Warm in the East

Inventories fall more than expected
David Becker

Natural gas prices rose approximately 0.5% on Friday, hovering above support near the 10-day moving average at 1.86. Much colder than normal is expected to spread over the west and the upper mid-west but is expected to be warmer than normal throughout the east coast and lower mid-west. The lack of cold weather in the east is keeping a cap on NYMEX natural gas while natural gas prices on the west coast are beginning to rise. Natural gas inventories on Thursday declined more than expected according to the latest report from the EIA.

Technical Analysis

Natural gas prices continued to trade sideways, closing up by 1.25%, for the first weekly higher close in 4-weeks. The weekly fast stochastic is oversold printing a reading of 10, below the oversold trigger level which could foreshadow a correction. The daily fast stochastic is rising out of oversold territory after recently generating a crossover buy signal which points to accelerating positive momentum. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.

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Net Withdrawals Put Inventories Above the 5-Year Average

The EIA reported that net withdrawal from storage totaled 137 Bcf for the week ending January 31, compared with the five-year average net withdrawal of 143 Bcf and last year’s net withdrawal of 228 Bcf during the same week. Working natural gas stocks totaled 2,609 Bcf, which is 199 Bcf more than the five-year average and 615 Bcf more than last year at this time.

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